Amid turbulent market conditions, Hatton National Bank PLC continued to show resilience, strength and stability, posting a pre-tax profit of Rs 5.9 billion and an after-tax profit of Rs 4.8 billion for the first quarter of 2022, registering an annual growth of 7% and 3% respectively. At the group level, PBT and PAT stood at Rs 6.4 billion and Rs 5.4 billion respectively. Commenting on the first quarter performance, Aruni Goonetilleke, Chairman of Hatton National Bank PLC, said that “As Sri Lanka goes through unprecedented times, HNB has once again shown resilience. At this critical time, I would like to reiterate our commitment to all our stakeholders As a responsible national systemically important bank, ensuring safety, stability and sustainability is our primary objective.
With monetary policy tightening since August 2021, the AWPLR increased by almost 400 basis points in the 12 months to March 2022. This allowed the Bank to record a 59% increase in the NII at during the 1st quarter of 2022 compared to the corresponding period of the previous year. Net fee income increased by 42% year-on-year to reach Rs 3.2 billion for the first quarter of 2022, mainly driven by improved card transactions and commercial income. The significant devaluation of the rupiah in March 2022, compared to the previous year, resulted in gains of approximately 7.5 billion rupees in the first quarter of 2022. The Bank also recognized a depreciation of 7.4 billion rupees against the impact of currency devaluation on loans and investments denominated in foreign currencies, which was offset by position revaluations.
The Bank’s Phase III net lending ratio improved from 2.55% in December 2021 to 2.41% at end-March 2022, while Phase III provision coverage increased to 59 %, maintaining its position among the best in the sector in terms of asset quality. However, given the significant volatility of macroeconomic factors in the first quarter of 2022, the Bank recognized a higher impairment charge of Rs 13.4 billion. This included a writedown of Rs 6.7 billion on investments in foreign currency denominated government securities, following the announcement by the Central Bank of Sri Lanka regarding the suspension of repayment of foreign currency external debt obligations. government and sovereign rating downgrade. Operating expenses increased by 21% in 1Q 2022, due to salary revisions, relatively higher card transaction volumes with the recovery of economic activity and general expenses which increase in line with the increase in the inflation. However, the stronger revenue growth allowed HNB to record a cost on revenue of 25% in the first quarter of 2022.
HNB’s total tax burden increased by 33% to Rs 2.8 billion in the first quarter. The effective tax rate decreased from 31% in March 2021 to 37% in March 2022 due to the year-on-year reduction in interest income from foreign currency-denominated government securities. Jonathan Alles, Managing Director/Chief Executive Officer of Hatton National Bank PLC, said that, “Sri Lanka has traversed difficult terrain over the past few years, from the adverse weather conditions encountered in 2017-2018 to the unfortunate Sunday attacks of Easter in 2019, then to the most unprecedented COVID-19 pandemic that has affected the whole world. The banking sector in Sri Lanka and HNB overcame these challenges and emerged strong and stable. Today, Sri Lanka as a nation is facing one of the most difficult times in its history. The next few months would be even more difficult. As such, it is extremely important that we play our part as responsible Sri Lankans at the individual, organizational and national level. We believe that the authorities will take the necessary measures to ensure political, social, economic and financial stability to successfully conclude discussions with the International Monetary Fund, multilateral organizations and supporting countries to obtain the necessary financing.
“It is equally important that we focus on the real economy and on sustainable foreign exchange revenue streams that will support us in the medium to long term. It would be essential to provide the necessary support to boost exports, remittances, tourism, manufacturing and industrial development. At the same time, it would also be important to diversify sources of foreign exchange earnings. Focusing on Sri Lanka as an education hub, promoting agribusinesses, IT, KPO and BPO industries would also be key in this regard. We need to be careful with our spending and buy local products to support our micro, small and medium enterprises, while at the level of government, institutions and companies, adopt very strict cost containment measures and cut budgets .
“As we encounter many obstacles in our daily lives, I would like to express my sincere gratitude to each and every member of the HNB team for their continued commitment and dedication to providing essential banking services to our valued customers.”( HNB)